Bank of Ireland revises up 2010 profit estimates
BANK of Ireland yesterday surprised the market by releasing an unscheduled trading announcement showing 2010's operating profits will be down 25 to 30pc, beating previous guidance.
The comments came as the bank, which is fighting to avoid majority state ownership, confirmed plans to pay €214m in dividends to the State and another €3.7m in dividends to private preference shareholders.
Bank of Ireland said news of the payments, which brings the bank's payments to the State to just over €750m, necessitated a trading update to prove the bank was in a position to make the distribution.
Yesterday update means Bank of Ireland is now on course for underlying operating profits of €980m to €1.05bn, against the €900 to €975 range guided in mid-November.
In a note to clients, Davy's banking analyst Emer Lang attributed the better performance to "the margin benefit of greater-than-expected reliance on monetary authorities".
Bank of Ireland also confirmed it had suffered "significant outflows" of so-called "ratings sensitive" deposits in the run-up to November's bailout announcement.
Ratings sensitive deposits are typically held by pension funds, investment funds and corporates and tend to respond badly to periods of uncertainty.
The bank said its retail deposits base in Ireland had "remained stable", while retail deposits in its UK Post Office joint venture "continue to outperform expectations".
The 2010 results will also show a €100m hit on Bank of Ireland's bond portfolio after the bank agreed to sell back some AIB bonds at a discount.
Bank of Ireland took another €70m hit on the bonds it was issued by the National Asset Management Agency after the agency decided not to make a discretionary interest payment on March 1.
The Government has invested €3.5bn in Bank of Ireland and may have to plough in more cash at the end of March, pending the outcome of stress tests.
In a statement yesterday, Finance Minister Brian Lenihan said the €214m payment was a "very welcome return" on the National Pension Reserve Fund's investment in the bank.